When I was a kid, I don’t recall ever seeing a Federal Reserve banknote with more than one zero in a corner. Big money in my world was the twenty-dollar bill, which was what Dad pulled out of his wallet to cover our family’s monthly dinner (prime rib, mashed potatoes, green beans, and lemon meringue pie for four) at the Hotel Lincoln. My first job as a teenager involved pulling tassels out of cornstalks for $1.25 an hour. The only millionaires I’d heard of were ‘tycoons’ such as John D. Rockefeller (oil), Cornelius Vanderbilt (railroads), and Henry Ford (cars).
Today, everyone seems to personally know a millionaire. A really wealthy person (Jeff Bezos, Elon Musk) is a billionaire. Add another set of zeros and the next level is a trillion, a monetary measure used in the realm of a few corporations and many governments. Written out, this is what a trillion dollars looks like:
$1,000,000,000,000.00.
Million …billion …trillion … they all have the same ring. But the word trillion simply goes ‘whoosh’ over peoples’ heads. The number is too big to grasp. The fact is, people connect with things they can see and comprehend. Take, for example, celestial bodies. More poems and songs have been dedicated to the moon than to Jupiter (which is better looking and forty times larger). And the next time you notice the sun … that’s how far a trillion one-dollar bills would stretch if laid end to end. Farther, in fact.
So, what’s the deal with this proliferation of dollars? Are people today that much more productive than they were fifty years ago, or is there something funny going on? In 1971, the same year I worked the cornfields near Lincoln, Illinois, President Richard Nixon severed the dollar’s link to gold. We needed more money at the time, and it’s just easier to print dollars when they’re not tied to anything. Along the way, several economic mishaps caused the monetary zeros to multiply like rabbits. In 2008, the Great Financial Crisis launched the Federal Reserve’s quantitative easing (money printing) programs, and QE1 set sail. Today we are on the QE4 cruise, captained by ‘Admiral’ Jay Powell. These QE ‘love boats’ have made quite a few Americans happy. Levitating home prices and bulging retirement accounts have soothed anxieties over COVID and rising prices. At least for those with homes and retirement accounts.
So, where are we today? Most of us are budget conscious when we spend our own money. But the folks in government also spend our money, and they have their own motivations. Politicians love power. Primary season is in full swing. Campaign ads during the evening news show the familiar playbook: pound the table on social and cultural issues, and of course warn about the ‘evil’ people on the other side who want to hunt you down and kill you and eat you. That’s the stuff that gets the votes. Trillion-dollar budgetary issues won’t move Joe Average off the couch. The fact is, with our boomer-dominated federal government, both Republicans and Democrats have spent years borrowing from grandkids and bribing us with our own money, mostly for political power. Our national debt reached $30 trillion last month. If you’re curious to see what the elephant in the room looks like, click here. I suppose we will reach an endpoint someday. One wonders … how many trillions might that be?
Any opinions are those of James Aldendifer and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Investing involves risk and you may incur a profit or loss regardless of the strategy selected.
